By TIOL News Service

NEW DELHI, MAR 31, 2015: THE appellant imported assorted make old and used photocopier machines [CTH84433920] and declaring the value of the goods as Rs.10,13,256 /-. They also produced a Chartered Engineer's (CE) certificate showing the value of the goods as Rs.13,51,080/-. However, the Revenue did not accept the declared value and found that contemporary clearances as per NIDB data show the value as Rs.19,59,937/-.

The Revenue insisted for another CE certificate which was produced showing the value as Rs.16,18,920/-. This too was not accepted by Revenue and again another was procured which showed the value as Rs.20,13,120/-.

Consequently, proceedings were initiated and which culminated into an order passed by the Commissioner of Customs vide which he enhanced the value of imported photocopier from Rs.10,13,256/- to Rs.20,13,120/-; ordered confiscation; redemption fine of Rs.5 lakhs and penalty of Rs.2.50 lakhs u/s 112(a) of Customs Act.

In the Tribunal there was a difference of opinion. See 2014-TIOL-678-CESTAT-DEL.

The following was, therefore, referred to the third Member –

Whether on assessable value as determined in adjudication by the revenue is to be set-aside and redemption fine and penalty are to be reduced to 10% and 5% respectively as held by Learned Member (Judicial).

OR

Whether the valuation as enhanced by revenue based on Chartered Engineer's Certificate are to be upheld as importations have taken place without a licence and no land port Chartered Engineer's Certificate has been produced and further redemption fine and penalty as ordered by Commissioner is to be upheld as held by Member (Technical).

The third Member (T) on reference has passed an order recently.

++ In my view for determining the value of the old and used capital goods, which are of obsolete models, the NIDB data is not relevant at all as no two consignments of second hand goods and that too of obsolete models would be comparable. The value of a consignment of second hand machines would depend upon the years for which the machinery has been used, present condition and also whether the model is obsolete or whether such machines are still being manufactured. In this case as per the facts recorded in the impugned order-in-original, market inquiry indicated that the models of the photocopiers are obsolete models and the manufacturers have discontinued the manufacture of these models. If this is so, a supplier may sell such old and used goods of obsolete model even at throwaway price.

++ It is not the allegation of the Department that the appellant and the foreign supplier were related person or that there were circumstances as enumerated in the proviso to sub-Rule (2) of Rule 3 of the Customs Valuation Rules, 2007 on account of which the declared transaction value cannot be accepted.

++ Rule 12 of the Customs Valuation Rules also provides that if after inquiry by the proper officer, the proper officer doubts the correctness of the declared transaction value and rejects the same he is required to intimate the importer about rejection of the declared value after giving reasonable opportunity of being heard. But no such inquiry has been done in this matter. Merely on the basis of NIDB data while, as discussed above, the declared transaction value could not be rejected.

Inasmuch as on the issue of valuation, the third Member on reference agreed with the decision of Member (Judicial).

On the quantum of redemption fine and penalty, the Member (T) observed –

It is settled law in the cases of import of restricted goods without import licence, the quantum of redemption fine should be sufficiently high to neutralize the entire margin of profit. Member (Judicial) has reduced the fine to 10%. According to the Department it should be 50% of the declared value. However, if the Department seeks imposition of higher redemption fine, the evidence of higher profit margin should be produced in form of landed cost of the goods and the market price of the goods but no such evidence has been produced. In view of this, I agree with the decision of Member (Judicial) regarding reduction of redemption fine and penalty and in my view the redemption fine of 10% of the value and penalty of 5% of the value is sufficient.

The Majority decision, therefore, is –

…the impugned order is set aside as regards enhancement of the value of the imported goods. However, confiscation of the same is upheld and the redemption fine is reduced to 10% of the value of the goods and penalty to 5% of the value of the goods.

(See 2015-TIOL-582-CESTAT-DEL)